If you’re thinking of buying a home in South Carolina this year, we invite you to peruse this blog, which contains a plethora of helpful posts on real estate topics, including many that pertain specifically to buyers. Whether this is the first time you’ve ever purchased a home or you’ve been down this road before, it’s always best to work with an experienced real estate agent who has your best interests in mind as you navigate the process. One of the most important issues to think about when buying a home is your down payment.
Some buyers, such as those obtaining a VA or USDA loan, may be able to purchase a home without a down payment. However, generally speaking, the average home buyer will secure a mortgage loan that includes anywhere from 8% to 20% or more down up front. There are numerous reasons for making as much of a down payment as you can.
A solid down payment is beneficial in several ways
Most South Carolina home buyers will submit offers that include a down payment on a new home. The following list includes three potential benefits to doing so:
- A substantial down payment lets a seller know that you’re serious about your offer, which can be especially helpful if you become locked in a bid war, meaning that there are multiple offers on the table for the home you want to purchase.
- A low down payment might compel a lender to increase the interest rate on a mortgage loan; therefore, it is logical to assume that the more you put down up front, the better your interest rate might be.
- Because a higher down payment creates a lower loan-to-value ratio (LTV), your lender is at less risk if you default on your mortgage. In some cases (especially if you place at least 20% down), it might be possible to purchase a home without paying private mortgage insurance (PMI), which is a separate policy that buyers often must purchase to protect a lender in case of default.
In a nutshell, the more you put down on a home up front, the less you need to borrow, thereby lowering your loan amount, as well as the interest rate on the mortgage. While a down payment means you need money up front, you could wind up keeping more money in your pocket overall.
Discuss options with your agent and loan officer
Experienced real estate agents and mortgage loan officers can answer your questions and provide useful information and recommendations regarding the down payment process of a home purchase. Take advantage of these and other resources to ensure that you get the best return on investment (ROI) possible.